Khartsyzsk Pipe More Than Doubles Production In 2M 2006

Over the first two months of the year Khartsyzsk Pipe (HRTR: U/R) produced 122.3 ths mt of large-diameter pipes, an increase of 122% yoy. The company plans to produce 720 ths mt of LD pipes in 2007 an increase of 24% yoy. Andriy Gostik: The triple digit yoy surge in production is due primarily to low comparison base. HRTR will likely be able to increase output in 2007 as planned due to favorable market for LD pipes in Russia. However, we think that the risk of this market shrinking significantly for HRTR over the midterm is high. Russian players are expanding their production capacities and Gazprom demand is likely to tail off after it completes its major pipeline projects.